Survey Finds Online Talent Marketplace Popular with SMBs

Wednesday Jun 30th 2010 by Stuart J. Johnston
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How can a small business survive, much less thrive, in a down economy? One strategy may be to outsource some of the work you'd have to hire someone to do internally.

To no great surprise, a recent survey of small and medium businesses that hire online contractors found that many companies are using freelance talent because of the flexibility and cost effectiveness it affords. In fact, 87 percent of survey participants view hiring outside talent "as a way to enhance competitiveness and profitability."

Rhymes With Freelance

The survey of more than 500 companies that use the Elance online talent marketplace found that 87 percent of the respondents chose offsite hiring because it cuts the need to pay for office space, phones and computers for new hires.

Additionally, 82 percent found that the ability to quickly staff up or down provides business flexibility.

"There are around 100,000 SMBs who are hiring online," Ellen Pack, vice president of marketing for Elance (pronounced like "freelance"), told Small Business Computing. Elance functions as a marketplace, where creative and business people market themselves to small businesses that are looking to hire talent either temporarily or long-term.

Eight-year-old Elance conducted its survey online between June 3 and 14. The company regularly surveys its customers on various topics and, on occasion, has conducted polls with Microsoft.

Elance specifically targets small business, and the marketplace handles a diverse range of business and creative talent, ranging from programmers, designers, and writers, to admins, marketers and consultants, according to categorical listings on Elance's website.

"What we're seeing is people are staffing up online, and geography [where the person lives] has become irrelevant," Pack said.

Public Portfolios and Performance Reviews

"I like the flexibility," Mike Merrill, founder and CEO of SmartPhones Technologies, a mobile content publisher, told Small Business Computing.

SmartPhones Technologies publishes "custom celebrity, entertainment and college sports content on mobile devices ... through 28 carriers, portals and content providers worldwide," according to company statements. Merrill started off selling ringtones and wallpapers, with an emphasis on college sports.

"I initially found [designers] on Craig's List," Merrill said, but later switched to Elance. Two of the marketplace's features that attracted him were the ability to see the provider's portfolio and to review comments from previous employers.

Starting out by himself, even eschewing a paycheck for the first few years, Merrill found graphic designers through Elance. They developed a website, company logo, flyers and content samples. Smartphones Technologies now has more than 180 colleges as clients and -- in addition to the Elance talent -- it employs eight full-time staff, Merrill said. (Merrill was not a survey participant.)

The New Commute

However, there is a darker side to the current employment market in general, according to one analyst. As workers get laid off and can't find new employment, many end up starting their own businesses. That's where a marketplace model may come in.

"We're seeing a lot of movement to the 'contingent workforce,'" Steve King, a partner at small business analysis firm Emergent Research, told Small Business Computing. What does he mean by that? His other term for it is "part-time permanent employment."

"The Elance survey underlines that," King said.

In previous economic downturns, when the economy recovered, businesses would often rehire the people they had laid off.

"This time it's different," King added. "What we're hearing is they [companies] are not going to go back. This is a structural shift that's been going on for a long time. While cost is a big factor, the ability to staff up and down quickly is very powerful."

Reduced Overhead

Indeed, the Elance survey found that staffing flexibility was the second major incentive that companies cited for filling staff needs via a marketplace -- 82 percent -- behind not having to provide an office and other facilities -- 87 percent.

Don't expect the world to change overnight, though. While 64 percent of those surveyed said that they prefer to hire online versus in person, 24 percent preferred in-person.

One thing to bear in mind, however, is that all of the participants in the survey were already Elance marketplace users. Some 86 percent of those polled had hired someone through the marketplace in the last year.

That means they've already gotten over initial hesitancies about the marketplace model -- if not completely sold on its benefits.

Going forward, 64 percent said they would continue to use a hybrid hiring model that included bringing in both in-house workers as well as remote ones. Seventeen percent said they would only hire online, but a mere two percent said they would only hire in-house.

SmartPhones Technologies's Merrill is a good example of the mainstream in that regard.

Stuart J. Johnston is a contributing writer at InternetNews.com, the news service of Internet.com, the network for technology professionals.

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